- 505 -
In addition, respondent argues that the testimony of Mallin and
Uhl is suspect and not credible.
We agree with respondent. At the outset we observe,
contrary to certain facts alleged by IRA, that this record
clearly establishes that IRA was engaged in the practice of
purchasing tax benefits, rather than buying and leasing computer
equipment for economic, profit-oriented reasons.
To fully appreciate IRA's tax motivation for entering into
these leasing transactions, we have considered them in the
context of the schemes and other issues raised in these
consolidated cases. There is no doubt that IRA was a vital cog
in Kanter's sophisticated financial machinations. IRA, Holding
Co., the "black box" represented by Administration Co. and
Principal Services, and the other various investment entities
created as alter egos of Kanter, constituted devices by which
Kanter received and disguised fees for his personal services,
including moneys received pursuant to the Prudential scheme.
When these matters are viewed in context, we are persuaded that
the leasing transactions were consummated for the sole purpose of
producing deductions sufficient to offset the income reported on
IRA's Federal income tax returns. Furthermore, to ensure that no
net income would have to be reported by IRA, all of the equipment
was effectively disposed of after the tax benefits were fully
utilized.
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